RFID scans trolleys at Samsung Tesco

Korea's second largest supermarket chain is counting on RFID to understand its customers better.

Samsung Tesco last year equipped its shopping trolleys and baskets with RFID chips to track customer movements at each of its 69 stores. The supermarket chain is a joint venture established in 1999 between consumer electronics giant Samsung and UK supermarket operator Tesco.

"Typically, supermarkets place products on the shelves according to food categories. So, if a customer wants to buy ingredients for a breakfast meal, he would have to visit multiple sections of the supermarket," said Lee Kang-Tee, chief information officer of Samsung Tesco.

"With RFID, we can make it more convenient for shoppers by placing products [on the shelves and aisles] according to customers profiles and habits."

Plans for "smart shelves" are in the pipeline. Lee explained that data gathered by its RFID system allows the supermarket chain to position products so they get noticed by more customers. It also enables store managers to identify crowded areas within their stores, and reposition the shelves to ease congestion. Data analysis is undertaken by an in-house application developed by the company's engineers.

Lee said the company is now in the second phase of its RFID implementation, which began in 2004, when it worked with key suppliers such as Procter & Gamble to embed RFID tags in goods to track their movements. This has allowed the company to improve out-of-stock and overstock situations, Lee said, but he declined to provide actual figures.

So far, Samsung Tesco has spent about $800,000 (£430,000) on its RFID systems, $300,000 of which was subsidised by the South Korean government, Lee said.

Customer data collected from the RFID system has been valuable but he noted that setting it up proved daunting. For instance, off-the-shelf RFID readers that were used to pick up radio signals from the roaming trolleys could not fit into the store shelves. As a result, company engineers had to custom-make readers into a smaller size.

Lee also pointed out a limitation of the supermarket's system. Because the RFID chips are attached only to the store's trolleys and baskets, there is no way of mapping the shopping patterns of customers who do not use a carrier, he said.

To ease security concerns that shoppers may harbour, Lee said notices have been placed around the store to inform customers their shopping patterns are being tracked. The company has not received any complaints about loss of privacy so far.

According to Lee, plans for "smart shelves" are in the pipeline. These will allow suppliers to be notified whenever items on store shelves run low. "But it won't happen anytime soon," he said. "Not until we have reached a certain level of confidence in RFID technology."

Samsung Tesco is not the first supermarket to embrace RFID in a big way. Amongst the growing number of retailers that have taken the RFID route, the US' largest grocery chain Wal-Mart, famously passed a mandate to push its top suppliers to deploy RFID in their supply chain.

According to analyst house IDTechEx, the RFID market, including software and services, will reach $26.2bn by 2016.

Despite the strong market support, RFID has gained its share of criticisms including privacy concerns and interoperability issues.

Aaron Tan writes for ZDNet Asia